The Strategist

China cuts interest rates for the second time in the last three months

08/16/2023 - 11:04

According to Bloomberg, the People's Bank of China slashed key interest rates on August 15, for the second time in the previous three months.

The bank reduced the one-year funds rate by 15 basis points this time, from 2.65% to 2.5%. This reduction is the most since 2020. The rate is presently at its lowest point since it was initially established in 2014. On August 15, the bank also reduced the interest rate on refinancing loans for a week to 1.8%.

The bank made all of these cuts less than an hour before the announcement of July's weaker-than-expected growth figures, which surprised analysts. While a 4.5% increase was anticipated, retail sales increased by 2.5%. In July, exports totaled 2.016 trillion yuan ($278 billion), a 9.2% decline from the same month last year.

According to Reuters' poll of analysts, the rate cut indicates a step up in monetary stimulus measures to sustain slowing economic development and pave the way for a possible cut in China's benchmark lending rate the following week.